8.4 Bank Reconciliation Flashcards
Definition of Bank Statement Terms
What are common types of timing differences in bank reconciliation?
Direct deposits, direct payments, cheques not yet presented, deposits in transit, dishonoured cheques.
What is a direct deposit?
The customer deposits cash or cheques with the bank directly or transfers funds directly into the business bank account through a credit transfer.
What is a direct payment?
The bank pays interest on deposits directly into the business bank account.
What is a standing order?
An instruction to the bank to pay a specific amount of money to a specific payee from the payer’s account on a regular basis.
An example of a standing order in Singapore is the Interbank GIRO (IBG).
What happens with cheques not yet presented?
The business has issued a cheque to its supplier but the supplier has not presented the cheque to the bank for payment yet.
What are deposits in transit?
The business has deposited the cheque with the bank but the bank has not processed the cheque yet.
What are dishonoured cheques?
The bank rejects a cheque that the business has previously deposited.
What can cause differences in ending balances during bank reconciliation?
Errors made by the business or the bank.
When is bank reconciliation usually performed?
At the end of the month when the bank statement is received.
How has technology impacted bank reconciliation?
Bank reconciliation can now be performed daily.
What is the significance of bank charges?
When the business uses the bank’s services, it has to pay bank charges.
